APR Constructions Limited - Saffron Capital

The Indian Railways has been provided Rs 16,752 crore in 2010-11 for modernization and expansion of rail
network.
(Source: www.indiabudget.nic.in)
TYPES OF CONTRACTS USED IN THE INFRASTRUCTURE AND CONSTRUCTION INDUSTRIES
There are different models currently being adopted for Public Private Partnerships in India which vary in the
distribution of risks and responsibility between the public and the private sectors for financing, constructing,
operating, and maintaining projects. Two important types of contracts - BOT and BOOT - are explained below, as
well as certain other contracts generally used in the Indian construction industry.
Build, Operate and Transfer (“BOT”)
Under this type of PPP contract, the Government grants to a contractor a concession to finance, build, operate and
maintain a facility for a concession period. During the life of the concession, the operator collects user fees and
applies these to cover the costs of construction, debt-servicing and operations. At the end of the concession period, the
facility is transferred back to the public authority. BOT is the most commonly used approach in relation to new
highway projects in India, and is also used in the energy and port sectors.
Build, Own, Operate and Transfer (“BOOT”)
BOOT contracts are similar to BOT contracts, except that in this case the contractor owns the underlying asset,
instead of only owning a concession to operate the asset. For example, in the case of hydroelectric power projects, the
contractor would own the asset during the underlying concession period and the asset would be transferred to the
Government at the end of that period pursuant to the terms of the concession agreement.
Design, Build, Finance and Operate (“DBFO”)
The NHAI is planning to award new highway contracts under the DBFO scheme, wherein the detailed design work is
done by the concessionaire. The NHAI would restrict itself to setting out the exact requirements in terms of quality
and other structure of the road, and the design of the roads will be at the discretion of the concessionaire. The DBFO
scheme will improve the design efficiency, reduce the cost of construction and reduce time to commence operations,
in addition to giving the concessionaire greater flexibility in terms of determining the finer details of the project in the
most efficient manner.
Item Rate Contracts
These contracts are also known as unit-price contracts or schedule contracts. For item rate contracts, contractors are
required to quote rates for individual items of work on the basis of a schedule of quantities furnished by the customer.
The design and drawings are provided by the customer. The contractor bears almost no risk in these contracts, except
escalation in the rates of items quoted by the contractor, as it is paid according to the actual amount of work on the
basis of the per-unit price quoted.
Engineering Procurement Construction/Lump-Sum Turnkey Contracts
In this form of contract, contractors are required to quote a fixed sum for the execution of an entire project including
design, engineering and execution in accordance with drawings, designs and specifications submitted by the
contractor and approved by the customer. The contractor bears the risk of incorrect estimation of the amount of work,
materials or time required for the job. Escalation clauses might exist in some cases to cover, at least partially, cost
overruns.
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